The global economy is proving more resilient than expected, but the International Monetary Fund’s latest outlook offers little reason for complacency. The IMF now projects 3.1% global growth in 2026, up from its July forecast of 3%, yet down from 3.5% in 2025. The improvement is being driven largely by investment linked to artificial intelligence, while war-related energy shocks, high public debt and uneven access to technology are widening the gap between economies.[1]
That combination creates a deceptively stable picture. AI spending is acting as a powerful demand impulse: companies are buying chips, data-centre equipment and related services, supporting trade and financial markets. Advanced economies are expected to grow 2.1% this year, compared with 2% in 2025. But the same forecast sees their growth slowing to 1.9% next year, suggesting that the investment surge may not be enough to sustain momentum indefinitely.[2]
A narrow engine of growth
The distribution of the AI boom is central to the story. The United States and China account for more than three-quarters of net demand for imported computer chips and other AI-related equipment, according to the IMF. Economies integrated into the semiconductor supply chain, including Taiwan and South Korea, are benefiting disproportionately, while many poorer countries face higher energy bills without receiving comparable investment or productivity gains.[1]
That imbalance has political as well as economic consequences. Emerging and developing economies are forecast to grow 3.7% in 2026, sharply below their 4.5% expansion in 2025. China’s growth is expected to slow to 4.5% from 5%, broadly consistent with Beijing’s official target, while advanced economies continue to attract capital seeking exposure to AI infrastructure.[3]
Supporters of the current investment cycle argue that the technology could eventually lift productivity, reduce business costs and create new industries. The IMF’s improved forecast reflects that confidence: AI investment has helped offset some of the damage caused by sharply higher oil and gas prices. Yet that benefit is conditional. It depends on companies continuing to believe that future profits will justify today’s enormous spending.
War turns resilience into vulnerability
The other force shaping the outlook is the energy shock linked to the US-Iran war. The conflict has disrupted supply and pushed up global oil and gas prices, adding pressure to households, manufacturers and governments. The IMF expects global inflation to reach 4.7% in 2026 before easing to 4.1% next year, a path that could complicate interest-rate decisions and limit room for fiscal support.[4]
The effects are not evenly distributed. Energy-importing countries with limited fiscal capacity have fewer options to subsidize consumers or protect businesses. The Middle East and Central Asia region, directly exposed to the conflict, is projected to contract 0.3% this year. The IMF has warned that a prolonged war could revive inflation, weaken external accounts and strain public finances, particularly in low-income economies.[3]
“The world economy is being pulled in opposite directions” by an energy supply shock and an AI-driven demand shock, IMF Managing Director Kristalina Georgieva said during the fund’s annual meetings.[5]
The risk beneath the optimism
The most serious danger is that markets have priced in technological gains faster than the real economy can deliver them. The IMF has warned that a sudden reassessment of AI profits and productivity could weaken investment, tighten financial conditions and trigger a broad asset-price correction. In one downside scenario, a steep fall in AI investment could reduce global GDP by 1.1% by 2028 and US output by 1.8%.[6]
Debt magnifies that risk. Governments are already carrying heavy borrowing burdens, while higher interest rates and energy subsidies increase financing needs. Rising bond yields could create a feedback loop: more expensive debt would constrain public spending, weaken growth and make investors demand still higher returns. The IMF has also identified vulnerabilities among non-bank financial institutions, trade tensions, cyber threats and possible food-market disruption from El Niño as additional hazards.[7]
What comes next
For policymakers, the immediate challenge is to prevent the AI boom from becoming a substitute for broader economic resilience. That means protecting investment in education, infrastructure and energy security rather than concentrating benefits in a small group of technology and semiconductor hubs. It also means avoiding policies that leave vulnerable countries exposed to energy shocks and higher borrowing costs.
The next test will be whether AI investment produces measurable productivity gains outside the technology sector. If it does, the current boom may help sustain growth and eventually broaden prosperity. If expectations outrun results, markets could correct just as governments have less fiscal space to respond. The IMF’s forecast therefore describes not a settled recovery, but a fragile truce between technological optimism and geopolitical disruption.